Market Definition in the Platform Economy - (CRC) TR 224
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Discussion Paper Series – CRC TR 224
Discussion Paper No. 259
Project B 05
Market Definition in the Platform Economy
Jens-Uwe Franck 1
Martin Peitz 2
March 2021
(First version : January 2021)
1
Department of Law and MaCCI, University of Mannheim
2
Department of Economics and MaCCI, University of Mannheim.
Funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation)
through CRC TR 224 is gratefully acknowledged.
Collaborative Research Center Transregio 224 - www.crctr224.de
Rheinische Friedrich-Wilhelms-Universität Bonn - Universität MannheimMarket Definition in the Platform Economy*
Jens-Uwe Franck† and Martin Peitz‡
01 March 2021
ABSTRACT
The article addresses the role market definition can play for EU competition practice in the
platform economy. The focus is on intermediaries that bring together two (or more) groups of
users whose decisions are interdependent and which therefore are commonly referred to as
“two-sided platforms”. We address challenges to market definition that accompany these
cross-group network effects, assess current practice in a number of cases with the European
Commission and Member States’ competition authorities, and provide guidance on how prac-
tice is to be adapted to properly account for the economic forces shaping markets with two-
sided platforms. Owing to the complementarities of services provided to the user groups the
platforms cater to, the question arises whether and when a single market can be defined that
encompasses both sides. We advocate a multi-markets approach that takes account of
cross-market linkages, acknowledges the existence of zero-price markets, and properly ac-
counts for the homing behaviour of market participants.
Keywords: antitrust law; EU competition practice; market definition; market power; Market
Definition Notice; two-sided platforms; digital markets; network effects; matching plat-
forms; zero-price markets; homing decisions; SSNIP test
JEL classification: K21
* The authors gratefully acknowledge support from the Deutsche Forschungsgemeinschaft through CRC TR 224
(project B05). Parts of this article build on a report the authors prepared for the Centre on Regulation in Eu-
rope (CERRE) (“Market Definition and Market Power in the Platform Economy”, May 2019).
† Department of Law and MaCCI, University of Mannheim.
‡ Department of Economics and MaCCI, University of Mannheim.2
CONTENTS
I. INTRODUCTION _______________________________________________________ 3
II. WHY THE COMMISSION IS RIGHT TO ATTACH IMPORTANCE TO MARKET
DEFINITION IN (DIGITAL) PLATFORM MARKETS _______________________________ 5
1. The positivist angle: EU competition law requires to define markets ____________________ 6
2. On the jurisprudential function of market definition and why the Commission should be
concerned about it ______________________________________________________________ 8
3. Avoiding the need for amendments to competition law and new ex ante regulation _______ 10
III. MAJOR CHALLENGES POSED BY THE TWO-SIDEDNESS OF PLATFORMS AND
HOW TO COPE WITH THEM _______________________________________________ 11
1. Single-market approach vs. multi-markets approach _______________________________ 11
a)
Established EU competition practice: multi-markets approach to payment card systems _ 12
b)
On the (in)adequacy of a single-market approach in the case of matching platforms ____ 12
c)
Conclusions ____________________________________________________________ 16
2. Markets without a price _____________________________________________________ 17
a) Why do zero-price markets exist? ___________________________________________ 17
b) Past EU competition practice: (unfounded) reluctance to define “viewers’ markets” _____ 18
c) On the acknowledgement of zero-price markets in the world of digital platforms _______ 19
d) Conclusions ____________________________________________________________ 20
3. Market delineation and homing decisions _______________________________________ 21
a) Identifying homing patterns ________________________________________________ 22
b) The multi-homing/single-homing framework ___________________________________ 23
4. Multiple markets on one side of a platform _______________________________________ 24
a) Multi-purpose platforms ___________________________________________________ 24
b) Regional markets ________________________________________________________ 25
c) One-stop vs. multi-stop shopping ____________________________________________ 26
5. The SSNIP test____________________________________________________________ 26
IV. CONSIDERING CONCEPTUAL INTERDEPENDENCIES: MARKET DEFINITION,
MARKET POWER AND CROSS-GROUP NETWORK EFFECTS____________________ 31
1. Market shares as a proxy for market power: mitigating and aggravating factors __________ 31
2. Market definition must not (conclusively) determine the scope of the competition analysis __ 33
V. CONCLUSION _______________________________________________________ 34I. Introduction
Market definition belongs to the small group of concepts that are essential to all instruments
of EU competition law:1 the prohibition of anti-competitive coordination2 and abusive practic-
es,3 as well as merger control.4 It is primarily5 employed as a first step to assess a firm’s
market power.6 The definition of a market is meant to provide a framework that facilitates
identifying the competitive constraints market players face. Thus, market definition is used to
narrow down an area to which the analysis of factors can be constrained that are relevant for
determining market power, as well as to identify barriers to entry.7
When, in 1997, the European Commission issued its current Market Definition Notice, the
rise of the digital platform economy was still to come. Today, it is the digital platforms that
appear to pose the greatest challenges to competition practice: search engines, social net-
works, online marketplaces, mobile operating systems and app stores, online travel agen-
cies, video platforms, real-estate portals and the like. What characterizes these platforms is
that they create and manage network effects,8 particularly9 as they act as intermediaries be-
tween different user groups who are linked through cross-group network effects,10 a feature
that is commonly referred to as “two-sidedness”:11 decisions of users in one group are mate-
rially dependent on the decisions of users in another group and the platform operator has the
opportunity to significantly influence those decisions.
1 Note that we do not include State aid law in our analysis. While market definition is also relevant to applying
State aid law, the concept has not yet been developed and applied in an equally rigorous way as in car-
tel, abuse and merger cases. See Sousa Ferro, Market Definition in EU Competition Law (Elgar, 2019),
pp. 91–96.
2 Art. 101 TFEU.
3 Art. 102 TFEU.
4 Council Regulation (EC) No 139/2004 of 20 Jan. 2004 on the control of concentrations between undertakings
(the EC Merger Regulation). O.J. 2004, L 24/1.
5 On the objectives of market definition see Sousa Ferro, op. cit. supra note 1, pp. 29–36; Hahne, Das Erfordernis
der Marktabgrenzung aus rechtlicher und ökonomischer Sicht (Nomos, 2016), pp. 27–36.
6 Commission Notice on the definition of relevant market for the purposes of Community competition law. O.J.
1997, C 372/5 (in the following referred to as “Market Definition Notice”), para 2.
7 OECD, “Market definition, policy roundtables, background note by the Secretariat”, DAF/COMP(2012)19, pp.
28–29.
8 For an introduction to the economics of network effects, see, e.g., Belleflamme and Peitz, “Platforms and net-
work effects” in Corchon and Marini (Eds), Handbook of Game Theory and Industrial Organization, vol. II
(Edward Elgar, 2018), pp. 286–317.
9 “Two-sidedness” is not a necessary precondition for the creation and management of network effects: a social
network facilitates interaction between users on one side. An online shop that gives buyers the option to
review, recommend or rate products available for sale allows for the creation of direct network effects
across its customers. For that reason alone, it is reasonable with regard to many policy questions that
arise due to digitization to focus on these scenarios and conceptualize such market players as (digital)
“platforms”. See, for instance, Regulation (EU) 2019/1150 of the European Parliament and of the Council
of 20 June 2019 on promoting fairness and transparency for business users of online intermediation ser-
vices, O.J. 2019 L 186/57. However, the main challenges with regard to the competition law concept of
market definition are indeed based on the characteristic of “two-sidedness”.
10 We speak of a positive cross-group network effect that side A exerts on side B if a user on side B benefits if
more users on side A participate (or if users on side A increase their usage volume). If these cross-group
network effects operate in both directions, then there are indirect network effects on each side. For ex-
ample, a user on side A indirectly benefits from more users on its own side because these users make it
more attractive for users on side B to join; additional users on side B then benefit the user on side A.
11 Certainly, many platforms cater to more than two groups that are linked through cross-group network effects
and should therefore be called “multi-sided”. Since the term “two-sided platform” is widely used, we follow
this convention with the understanding that at least two groups are involved.4
How these interdependencies between two or more user groups should be taken into ac-
count when defining markets raises a number of fundamental issues that were not addressed
in the Market Definition Notice of 1997.12 This is remarkable because two-sidedness is not a
feature unique to digital platforms. Capturing the business models of newspapers, (ad-
financed) TV, payment card systems or shopping centres – to name but a few instances of
“traditional” two-sided platforms – poses essentially the same problems. However, digital
platforms have gained more prominence because their business model is often scalable and
thus, they raise more public interest both in general and, more particularly, in competition
policy concerns. It is against this background that, in the last two decades, the economic
theory of two-sided markets has experienced considerable progress and its implications for
competition policy have been widely discussed.
Adapting the Market Definition Notice to meet the realities and challenges posed by the rise
of digital platforms will therefore be the central concern of the review of the Notice launched
by the Commission in April 2020.13 Thus, this evaluation must be seen as one of a series of
measures by the Commission to adapt the EU competition law framework so that it can cope
with the (digital) platform economy. In this vein, the Commission is also about to reform the
Vertical Block Exemption Regulation,14 is considering several calibrations to the EU merger
rules,15 and has proposed a “Digital Markets Act”.16
The remainder of this article is structured as follows. In Section II we explain that the Com-
mission, national competition authorities and courts are indeed well advised to pay attention
to market definition precisely because, in the context of two-sided platforms, the concept is
more cumbersome to implement. In Section III, we address fundamental challenges that
come along with applying market definition on two-sided platforms. In Section IV, we consid-
er two issues on the proper role of market definition that are conceptually intertwined and
that underlie our position on the correct market definition in the context of two-sided markets.
12 The Notice does discuss primary and secondary markets as an instance of (connected) markets where con-
straints on substitution imposed by conditions in one market have to be considered for the definition of
the connected market definition. See Market Definition Notice, cited supra note 6, para 56. Given the
complementarity of the products offered on the respective markets, the relationship between primary and
secondary markets may appear similar to that of the markets to which two-sided platforms cater. Note,
however, that this complementarity is of a different kind in both scenarios, in particular as two-sided plat-
forms offer their services to different user groups that are linked through cross-group network effects.
Therefore, the role of network effects is the key to understanding the market realities in the case of two-
sided platforms. In light of this, questions of market definition also present themselves differently than in
the context of primary and secondary markets.
13 On 3 April 2020 the Commission published an evaluation roadmap. See https://ec.europa.eu/info/law/better-
regulation/have-your-say/initiatives/12325-Evaluation-of-the-Commission-Notice-on-market-definition-in-
EU-competition-law (accessed 21 Sept. 2020). A consultation period has been running since 26 June
2020. See https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12325-Evaluation-of-
the-Commission-Notice-on-market-definition-in-EU-competition-law/public-consultation (accessed 21
Sept. 2020). The Commission will publish its evaluation results in 2021 and plans to adopt a reformed
Market Definition Notice in 2022. See
https://ec.europa.eu/competition/antitrust/legislation/timeline_table_M_AT_final.pdf (accessed 23 Dec.
2020).
14 See https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1564 (accessed 21 Sept. 2020).
15 See Commissioner Vestager’s speech “The future of EU merger control”, 11 Sept. 2020,
https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/future-eu-merger-
control_en (accessed 21 Sept. 2020).
16 COM(2020) 842 final, Proposal for a Regulation of the European Parliament and of the Council on contestable
and fair markets in the digital sector (Digital Markets Act).5
First, we explain why in such a context the calculation of market shares is less informative as
a proxy for market power. Second, we argue that market definition must not (conclusively)
determine the scope of a competition analysis. In Section V we conclude.
II. Why the Commission is right to attach importance to market definition in
(digital) platform markets
In their report on “Competition Policy for the Digital Era”, commissioned by Competition
Commissioner Vestager, the authors Crémer, de Montjoye and Schweitzer do not call the
instrument of market definition as such into question, but state that:
in the case of platforms, the interdependence of the markets becomes a crucial part of the analysis where-
as the role of market definition traditionally has been to isolate problems. Therefore . . . less emphasis
should be put on the market definition part of the analysis, and more importance attributed to the theories
of harm and identification of anti-competitive strategies.17
The premise of this statement should indeed not be controversial: how competition analysis
can do justice to the interdependencies between the effects certain market conduct has on
the different user groups of two-sided platforms is one of the key challenges the digital era
poses to competition law. The questions, however, of how much emphasis should be placed
on market definition and, particularly, how much resources should be devoted to it in compe-
tition enforcement by courts and authorities, has to be put in perspective.
First of all, as we will discuss more in detail in the next section,18 it is true that the established
methodologies for defining markets need to be adapted when applied to two-sided markets.
Market definition in the context of two-sided platforms is more complex and cumbersome,
and consumes more resources. Consequently, its results are more prone to error and, what
is more, the simple statistics that are derived after defining the market become less informa-
tive for the competition analysis. In particular, market shares are less meaningful as an indi-
cator of a two-sided platform’s market power, the assessment of which is an essential ele-
ment in merger control,19 in abuse cases,20 and when appraising the anti-competitive effects
of an agreement.21 This is because the said interdependencies between different user
groups have to be taken into account and can, depending on the facts of the individual case,
lead both to a situation where high market shares cannot be regarded as an indicator of a
high degree of market power and to a situation where a platform should be regarded as hav-
ing a high degree of market power even if it has only a relatively low market share on this
“market side”.22 These findings especially call into question intervention thresholds based on
market share.
17 Crémer, de Montjoye and Schweitzer, Competition policy for the digital era (2019), p. 46 (emphasis added).
18 See infra section III.
19 See Arts 2(2) and (3) of the EC Merger Regulation.
20 See Art. 102 TFEU, which applies to “undertakings of a dominant position within the internal market”.
21 See European Commission, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the
European Union to horizontal co-operation agreements, O.J. 2011 C 11/01, para 28. In contrast, compe-
tition authorities and plaintiff parties are spared from assessing market power if agreements can be re-
garded as having by their very nature the potential to restrict competition and, therefore, are categorized
as restrictions of competition “by object” pursuant to Art. 101(1) TFEU. See, e.g., Case C-235/92 P, Mon-
tecatini v. Commission, EU:C:1999:362, para 132.
22 See infra section IV.1.6
Furthermore, the rise of (two-sided) digital platforms poses the challenge for competition au-
thorities of identifying cross-market anti-competitive strategies that are new or appear to be
less relevant in other contexts. Just to name two examples: the Commission’s Google Shop-
ping decision23 could prove to be a catalyst for the development of a doctrine of abusive
“self-preferencing”, the scope of which is mainly seen in the area of two-sided digital plat-
forms. The concentration processes in the digital sector have fuelled the discussion over
whether merger control should pay much closer attention to acquisitions that cut off potential
competition.24
Against this background it becomes clear that competition analysis in relation to two-sided
(digital) platforms needs flexible thinking that must not be limited from the outset by conven-
tional ideas of market definition and market power assessment. Thus, the introductory quote
by Crémer et al. is indeed convincing when taking the position of a competition authority that
observes the potentially anti-competitive conduct of a platform or that has to assess a merger
that involves one or several platforms. In such constellations, it typically does not seem rea-
sonable to commence the investigation by devoting resources to a detailed and well-founded
market definition. Market definition is inappropriate as a screening device or a first filter to
identify competition problems with two-sided platforms. Instead, a competition authority is
usually well advised to concentrate its resources on the analysis of theories of harm and an
identification of possible anti-competitive strategies.
The picture changes, however, as soon as it is taken into account that market definition is in
many cases mandatory for the application of EU competition law. Moreover, it is in particular
the courts that are faced with competition cases – whether by way of judicial review of deci-
sions of competition authorities or by way of private litigation – that benefit from a better
transparency of the competition analysis and a clearer focus on the key arguments that go
hand in hand with market definition. Viewed from this angle, the finding that market definition
is more complex, error-prone and possibly less informative in the case of two-sided platforms
may indeed lead to quite the opposite conclusion to the one stated above: the (correct) appli-
cation and interpretation of market definition on two-sided platforms requires special dili-
gence and attention.
1. The positivist angle: EU competition law requires to define markets
A competition law system might entirely dispense with defining markets. In particular, eco-
nomic instruments make it possible to measure market power directly. Whether such a sys-
tem is preferable in terms of administrability, implementation costs, error costs, legal certain-
ty etc.25 appears to be doubtful but may remain open at this point. The practical relevance of
23 Case AT.39740 Google Search (Shopping). An appeal is pending before the General Court (Case T-612/17
Google and Alphabet v. Commission).
24 Motta and Peitz, “Removal of potential competitors – A blind spot of merger policy?”, 6 Competition Law & Poli-
cy Debate (2020), 19–25.
25 An abandonment of the concept of market definition has been suggested, in particular, by Kaplow, “Why (ever)
define markets?”, 124 Harv. L. Rev. (2010), 437–517; Kaplow, “Market definition: Impossible and coun-
terproductive”, 79 Antitrust L.J. (2013), 361–379; Markovits, “Why one should never define markets or
use market-oriented approaches to analyze the legality of business conduct under U.S. antitrust law: My
arguments and a critique of Professor Kaplow’s”, 57 Antitrust Bull. (2012), 747–885. For a defence of the
concept (though not necessarily as a mandatory element of competition analysis) see, e.g., Cameron,
Glick and Mangum, “Good riddance to market definition?”, 57 Antitrust Bull. (2012), 719–746; Keyte and7
market definition as a concept of EU competition law becomes obvious by the fact that it is
not only widely used by courts and authorities, but considered practically mandatory in vari-
ous contexts,26 in particular where market power has to be measured in order to determine
whether or not:
– agreements between undertakings give rise to restrictive effects on competition pur-
suant to Article 101(1) TFEU,27 and whether these effects are appreciable;28
– agreements between undertakings afford these undertakings the possibility of elimi-
nating competition in respect of a substantial part of the production in question and
thus are prohibited even though they fulfil the other requirements of an exemption
under Article 101(3) TFEU;29
– an undertaking is below the market-share thresholds that define the scope of applica-
tion of block exemption regulations;30
– an undertaking is market-dominant pursuant to Article 102 TFEU;31
– a concentration would (not) significantly impede effective competition, in the common
market or in a substantial part of it, in particular as a result of the creation or a
strengthening of a dominant position pursuant to Article 2(2) and (3) EC Merger Reg-
ulation.32
Even if market definition is more complex and less informative in cases involving two-sided
platforms, it seems rather unlikely that the ECJ will shift away from requiring it where it con-
siders it mandatory in non-platform cases. Thus, while defining relevant markets is for good
reasons not at the beginning of an investigation that concerns a (digital) two-sided platform,
to make a decision watertight, courts and authorities will ultimately have to define the rele-
vant markets at least in those contexts in which the ECJ has repeatedly considered it a nec-
essary element of a competition law analysis.33
Schwartz, “’Hally-Ho!’: UPP and the 2010 Horizontal Merger Guidelines”, 77 Antitrust L.J. (2011), 587–
650; Nevo, Definition of the Relevant Market: (Lack of) Harmony between Industrial Economics and
Competition Law (Intersentia, 2015), p. 262; Hahne, op. cit. supra note 5, pp. 268–283.
26 For a detailed analysis see Sousa Ferro, op. cit. supra note 1, pp. 56–91; Hahne, op. cit. supra note 5, pp. 61–
66 and 189–220.
27 See European Commission, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the
European Union to horizontal co-operation agreements. O.J. 2011 C 11/01, para 28.
28 See European Commission, Notice on agreements of minor importance which do not appreciably restrict com-
petition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice).
O.J. 2014 C 291/01, para 8.
29 See, e.g., Case T-395/94, Atlantic Container Line and Others v. Commission, EU:T:2002:49, para 300.
30 See, e.g., Art. 3 of the Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article
101(3) TFEU to categories of vertical agreements and concerted practices. O.J. 2010 L 102/1.
31 Case C-85/76, Hoffmann-La Roche v. Commission, EU:C:1979:36, para 21; Case T-62/98, Volkswagen v.
Commission, para 230; Case T-61/99, Adriatica di Navigazione v. Commission, EU:T:2003:335, para 27;
European Commission, Dec. 2005, DG Competition discussion paper on the application of Article 82 of
the Treaty to exclusionary practices, para 11.
32 Case C-68/94, France and Société commerciale des potasses and de l’azote and Entreprise minière and chi-
mique v. Commission, EU:C:1998:148, para 143; Case T-342/99, Airtours v. Commission,
EU:T:2004:192, para 19; Case T-151/05, NVV and Others v. Commission, EU:T:2009:144, para 51;
Case T-399/16, CK Telecoms UK Investments v. Commission, EU:T:2020:217, paras 144–145. See also
European Commission, Guidelines on the assessment of horizontal mergers under the Council Regula-
tion on the control of concentrations between undertakings, O.J. 2004 C 31/5, para 10.
33 Certainly, an ultimate market definition must not be given where different (plausible) definitions lead to the same
outcome. See, e.g., Case M.4731, Google/Doubleclick, paras 44–56 (Commission left open whether8
2. On the jurisprudential function of market definition and why the Commission
should be concerned about it
To include market definition as a formal step in a competition analysis, thereby combining an
approach structured and defined by law with economic methods, forces those who invoke
and enforce competition law to carefully consider, interpret and (verbally) explain when and
to what extent substitution may restrict a firm’s market power. This not only disciplines com-
petition authorities or parties that carry out and put forward a competition analysis before a
court but makes their arguments more transparent to the parties affected by a decision, the
opposing parties in private litigation and, last but not least, the courts that have to review an
authority’s decision or to judge in dispute between private parties. Thus, not only can the
requirement to define markets make competition practice more transparent and predictable
to the firms concerned; it also facilitates the work of the courts and, consequently, may help
to avoid judicial errors and improve the effectiveness of judicial redress.
This is not to say that the direct application of economic methods to substantiate a theory of
harm would necessarily lead to greater legal uncertainty.34 But including market definition in
an analysis may help courts to review cases more efficiently, because it may limit from the
start the theories of harm and countervailing efficiency effects that might be put forward by
the parties. Consequently, one may indeed assume that, insofar as market definition was
postulated by the courts as a necessary prerequisite for the application of EU competition
law, this was done in order to guarantee legal certainty and to facilitate judicial review.35 This
rationale would be missed if there were no legal clarification of those (fundamental) issues
that market definition raises in the case of two-sided platforms.
This leads to the question of why the Commission in particular should take on this task.
Since, after all, while the Commission itself, when exercising its discretion, is bound by the
rules it has laid down in the Market Definition Notice,36 it is the ECJ that has the last word on
the interpretation of the EU competition provisions. One could therefore assume that the clar-
ification of legal issues regarding market definition lies anyway in the hands of the European
courts or, indirectly, the national courts as they can initiate preliminary references to the
ECJ.37
Analysis of the European courts’ adjudication on market definition has revealed that the
Court of Justice and the General Court tend to attach great importance to the Commission’s
statements in the Market Definition Notice.38 There should be no doubt that, as a matter of
principle, the rules on market definition as developed and applied by the Commission should
be subject to full judicial review. It is otherwise only for their actual implementation, insofar39
search and non-search advertising have to be considered separate markets); Case M.7217, Face-
book/WhatsApp, para 79 (Commission left open whether segments of the market for online advertising
constituted relevant product markets in their own right).
34 See Hahne, op. cit. supra note 5, pp. 252–257.
35 See Sousa Ferro, op. cit. supra note 1, p. 30.
36 Case T-210/01, General Electric v. Commission, EU:T:2005:456, para 516; Sousa Ferro, op. cit. supra note 1,
pp. 51–52.
37 Art. 267 TFEU.
38 See Sousa Ferro, op. cit. supra note 1, pp. 52–55.
39 See Sousa Ferro, “Judicial review: Do European courts care about market definition?”, 6 JECLAP (2015), 400–
410, at 410 (“[W]hile market definition theory may be highly complex, its practical application and the9
as it involves complex economic assessments.40 Yet, as one observer noted, “[o]ne is hard
pressed to find a case, since the [General Court] was created, with any level of substantial
analysis of [market definition] by the ECJ”.41 This indicates that the Commission’s 1997–
Notice was a truthful codification of the Court’s preceding adjudication and that the Commis-
sion’s positions on the legal issues42 of market definition were barely challenged by the par-
ties and, thus, seem to have been essentially undisputed. This leaves us with the – admit-
tedly somewhat trivial – insight that a careful analysis of the questions of law involved with
market definition on part of the Commission provides valuable guidance to the European
Courts and saves judicial resources.
Further, it must not be ignored that the Commission enjoys a special position vis-à-vis the
national courts and authorities: while the latter are not bound by guidelines, notices and other
soft law instruments,43 they are bound by the Commission’s decision-making practice in the
circumstances covered by Article 16 of Regulation 1/2003. In fact, Member State courts44
and authorities45 often seem to regard it as an obvious option to follow the Commission's
view as expressed in its soft law instruments without further ado.46 Thus, the distinguished
position of the Commission47 should be seen also as entailing a particular responsibility to
provide guidance on the legal rules that govern market definition in EU competition law.
Finally, it should not be forgotten that the Commission has comparatively great expertise and
considerable resources at its disposal. Certainly, this also involves a wide range of tasks. But
the Commission, when considering how to use its resources, should not underestimate the
crucial importance of the positive externalities it may create to the benefit of the national
specific issues raised before Courts usually do not require complex assessments of an economic nature.
The majority of market definitions are not based on complex economic data, but are instead build on
facts, opinions, and logic”).
40 The ECJ traditionally exercises only a limited review with regard to complex economic appraisals. See, e.g.,
Case C-42/84, Remia v. Commission, EU:C:1985:327, para 34; Case C-142/83, BAT Reynolds v. Com-
mission, EU:C:1987:490, para 62.
41 Sousa Ferro, op. cit. supra note 39, at 407.
42 The Commission’s implementation of market definition, i.e. its fact-finding and interpretation of facts, has been
challenged in various instances. See, e.g., Case T-342/07, Ryanair v. Commission, EU:T:2010:280, pa-
ras 95–117.
43 But note the Grimaldi doctrine, according to which the Member States’ courts when adjudicating on EU law
must consider recommendations issued by the EU institutions “in particular . . . where they are designed
to supplement binding Community provisions”. Case C-322/88, Grimaldi v. Fonds des maladies profes-
sionnelles, EU:C:1989:646, para 18. See on the development, scope and impact of the doctrine Korkea-
aho, “National courts and European soft law: Is Grimaldi still good law?”, 37 YEL (2018), 470–495.
44 There seems to be no research with a focus on the Market Definition Notice’s impact on the jurisprudence of
Member States’ courts. The reception of five other competition-related soft law instruments issued by the
Commission is analysed in Georgieva, “The judicial reception of competition soft law in the Netherlands
and the UK”, 12 ECJ (2016), 54–86.
45 A certain reluctance on part of a national competition authority to develop its own position on market definition
in the digitized economy has been noted, for instance, in Kováčiková, “A definition of digital markets by
the Slovak Antimonopoly Office – Has the boat to digitalisation already sailed?”, 13(21) Yearbook of Anti-
trust and Regulatory Studies (2020), 247–258, at 256, which, after analysing market definition in three
decisions by the Slovak Antimonopoly Office, concluded that “courage to launch an expert discussion
and apply new tests to explore and assess the digital market is still lacking”.
46 Hence, one should only assume with caution that the use of EU soft law instruments would preserve Member
States’ autonomy and guarantee flexibility and diversity of national regulatory approaches. See Korkea-
aho, “EU soft law in domestic legal systems: Flexibility and diversity guaranteed?”, 16 MJ (2009), 271–
290.
47 See Ackermann “European competition law” in Riesenhuber (Ed.), European Legal Methodology (Intersentia,
2017), pp. 513–535, at p. 520 (“the Commission . . . has therefore grown into the role of an authentic in-
terpreter of competition rules”).10
courts and authorities by elaborating and publishing its own legal position on market defini-
tion in the platform economy.
3. Avoiding the need for amendments to competition law and new ex ante regula-
tion
Clarifying the necessary adaptations for market definition is essential to facilitate the applica-
tion of traditional competition law instruments to two-sided platforms. This, in turn, may con-
tribute to making it avoidable to amend competition law or to reducing the scope of new ex
ante regulation.
For instance, the Commission’s initiative for ex ante regulation through a “Digital Markets
Act”48 is motivated by the belief that current EU competition law is inadequate to protect func-
tioning competition in digital markets. This view is based only to some extent on clear-cut
limits to competition enforcement when dealing with two-sided (digital) platforms. As far as
the substance of competition law is at stake, it is mainly based on considerable uncertainties
as to its actual scope and problems of implementation – including uncertainties concerning
an adequate application of the established methods of market definition.49
Such uncertainties have also tempted Member States’ legislatures to expand national com-
petition law or to regulate at national level. Certain legislative measures in Germany may
illustrate this point. Under the recent reform of the German Competition Act, on the one
hand, the legislature integrated the concept of “intermediation power” into the market domi-
nance test.50 This amendment aims to make it easier to subject operators of two-sided plat-
forms to the general prohibition of abusive conduct,51 possibly even if their market shares
among users on one “market side” may well be below the threshold above which dominance
usually is considered conceivable. On the other hand, the legislature introduced a new re-
gime under which the German competition authority, the Bundeskartellamt, has been given
the power to formally establish that an undertaking is of “paramount significance for competi-
tion across markets.”52 Based thereon, undertakings can then be subject to the prohibition of
certain listed practices in markets they do not dominate.53 The legislator justified this with,
among other things, the insight that market definition in digital markets plays a less important
role for competition analysis.54 Independently of these reforms of the Competition Act, the
German legislature has established a right for payment service providers and e-money issu-
ers to access technical infrastructure that contributes to mobile and internet-based payment
48 Cited supra note 16.
49 See European Commission, “Digital Markets Act – Impact assessment support study”, executive summary and
synthesis report (Dec. 2020), p. 17 (“Meanwhile, competition law is not always an ideal solution due to
challenges in applying the market definition concept in multi-sided markets”). See also, in view of poten-
tial advantages through remedies (including possibly market-wide rule making) by way of a (then) con-
templated comprehensive market investigation instrument, Schweitzer, “The New Competition Tool: Its
institutional set-up and procedural design”, expert report prepared for the European Commission (2020),
pp. 24–25.
50 Section 18(3b) of the Competition Act (Gesetz gegen Wettbewerbsbeschränkungen).
51 Section 19 of the Competition Act (Gesetz gegen Wettbewerbsbeschränkungen).
52 Section 19a(1) of the Competition Act (Gesetz gegen Wettbewerbsbeschränkungen).
53 Section 19a(2) of the Competition Act (Gesetz gegen Wettbewerbsbeschränkungen).
54 Deutscher Bundestag, BT-Drucksache 19/25868, p. 113.11
services.55 One reason for this regulatory intervention – although certainly not the only one56
– was that it appeared to be uncertain whether Apple, as the operator of mobile devices,
could be regarded an addressee of Article 102 TFEU (or the equivalent provision under
German competition law). That depends in particular on the question of how the power that a
platform derives from a multi-homing/single-homing framework (“competitive bottleneck”57) is
considered within the market definition framework.58
Certainly, there is nothing wrong in adjusting competition laws to new challenges not only
incrementally by case law but also by way of legislation. And, where competition law fails to
ensure competitive outcomes, it may be necessary to regulate. Yet, the introduction of new
concepts in competition laws and new ex ante regulation comes at a price. Apart from the
immediate expenditure of legislation, it creates (new) legal uncertainty and is prone to error,
in particular as it may overstep the mark. Moreover, national measures, in particular by way
of ex ante regulation, lead to fragmentation within the internal market and, therefore, will typi-
cally in any case trigger a political debate on harmonizing legislation at Union level. That is
why such (national) legislative initiatives should be considered the result of a balancing exer-
cise that also includes the said cost factors. Therefore, by outlining how the concept of mar-
ket definition has to be implemented on two-sided platforms, the Commission may contribute
to clarifying the scope of EU competition law and, thus, may help to avoid or to tailor more
precisely the expansions of national competition law or new ex ante regulation that is meant
as a response to a level of competition enforcement that is allegedly too low or too uncertain.
III. Major challenges posed by the two-sidedness of platforms and how to
cope with them
To define markets, one has to identify the goods and services offered by an undertaking and
to understand substitute offers. This is more challenging in the case of two-sided platforms
as they typically offer complex and interrelated products. In the following, we address five
key issues.
1. Single-market approach vs. multi-markets approach
In the context of a two-sided platform, one approach is to define a market for each side.
Consequently, each of the two markets can be analysed separately while taking into account
that they are linked through cross-group network effects. This is referred to as the “multi-
markets approach”. Alternatively, one may define a single market for an intermediation ser-
vice offered to both sides of the market. This is referred to as the “single-market approach”.
55 Section 58a of the German Payment Services Supervisory Act (PSSA). See Franck and Linardatos, “Germany’s
‘Lex Apple Pay’: Payment Services Regulation overtakes competition enforcement”, JECLAP (forthcom-
ing).
56 Further, it is unclear whether and under which conditions a doctrine of abusive “self-preferencing” provides a
right of access beyond the conventional “refusal to supply” doctrine, which is characterized by a high in-
tervention threshold, requiring in particular that a facility (such as a platform) be indispensable for enter-
ing a neighbouring market so that a refusal to grant access would be likely to eliminate all competition in
this market. See from the EU adjudication Case C-7/97, Bronner, EU:C:1998:569, para 41; Case C-
241/91 P and C-242/91, P RTE and ITP v. Commission (“Magill”), EU:C:1995:98, para 56.
57 The term was coined by Armstrong, “Competition in two-sided markets”, 37 Rand Journal of Economics (2006),
668–691.
58 See infra section III.3.b).12
a) Established EU competition practice: multi-markets approach to payment card sys-
tems
The Commission and the EU courts had to consider this issue with regard to payment card
systems.59 In the MasterCard case, the General Court rejected the applicants’ view that there
was only one product market at issue, namely a market where the payment card systems
provided a single service offered to both cardholders and merchants and where they com-
peted against each other and against all other forms of payment. Thus, the General Court
confirmed the Commission’s view that the “issuing side” and the “acquiring side” should be
considered separate markets60 and reinforced this position in a subsequent judgment involv-
ing the French payment card system Cartes Bancaires.61
In Cartes Bancaires, the ECJ held that such a definition of separate issuing and acquiring
markets must not, however, have the effect that interdependencies with the “acquiring side”
of the payment system had to be excluded from the analysis of agreements on the “issuer
side”. The Court stressed that network effects between the two user groups must be taken
into account when assessing whether the payment system’s restrictions on the issuing of
cards should be regarded as a restriction of competition by object or effect under Article
101(1) TFEU.62 To reach this conclusion, the ECJ did not take an explicit stand on the ap-
plicability of the multi-markets approach as such. The judgment is most crucial, however,
because it clarifies in any case that doing justice to the interrelation between the different
sides of a two-sided platform does not require adopting a single-market approach. Thus, the
Court implicitly accepted the multi-markets approach under the condition that cross-group
network effects are considered for the definition of the markets on the two sides of the plat-
form and at subsequent stages of a competition law analysis.
b) On the (in)adequacy of a single-market approach in the case of matching platforms
While the Commission in recent years has dealt with quite a number of cases that involved
two-sided digital platforms, it appears that in none of these cases did the Commission explic-
itly engage in a discussion on the question of the conditions under which a multi-markets
approach or a single-market approach should be applied. Yet the Commission’s practice
indicates that it analyses these cases based on a multi-markets-approach throughout. First of
all, in various cases the Commission defined separate markets for online advertising and
user content.63 In all those decisions, the application of a multi-markets approach does not
seem to have been in dispute.64 This approach is, however, considered more controversially
59 See Sousa Ferro, op. cit. supra note 1, pp. 252–255.
60 Case T-111/08, MasterCard, EU:T:2012:260, paras 174–177. On appeal, market definition was not challenged
and, therefore, not addressed by the ECJ. Case C-382/12 P, MasterCard, EU:C:2014:2201, para 178.
61 Case T-491/07, RENV – CB v. Commission, EU:T:2016:379, paras 79–80.
62 Case C-67/13 P, Groupement des cartes bancaires, EU:C:2014:2204, paras 77–79.
63 See, e.g., Case M.5727, Microsoft/Yahoo! Search Business, paras 61–81 (online advertising) and paras 85–86
(internet search); Case M.7217, Facebook/WhatsApp, para 34 (consumer communications services), pa-
ra 61 (social networking services) and para 79 (online advertising); Case M.8124, Microsoft/LinkedIn, pa-
ras 74–83 (enterprise communications services), paras 87–117 (professional social networks), paras
126–147 (online recruitment services) and paras 152–161 (online advertising services).
64 But cf. Broos and Ramos, “Competing business models and two-sidedness: An application to the Google Shop-
ping case”, 62 Antitrust Bulletin (2017), 382–399, which argues that, in the case of Google, search mar-
ket and advertising market should not be separated since Google charges neither the consumers for
searching nor the advertisers for advertising per se but only for transactions (“per click”). This claim is,13
as regards so-called “matching platforms”, i.e. platforms that facilitate transactions such as
payment card systems, online marketplaces, hotel booking or real-estate platforms, or plat-
forms that enable a different kind of interaction, for instance online dating platforms.65 Most
prominently, the U.S. Supreme Court in Ohio v American Express Co. argued that “two-sided
transaction platforms, like the credit-card market . . . facilitate a single, simultaneous transac-
tion between parties” and, consequently, adopted a single-market approach.66 The UK’s
Competition and Markets Authority stipulated in a merger decision that involved two online
food ordering platforms that “where the platform is ‘matching’ or facilitating transactions . . . a
single market definition is appropriate, which takes account of the competitive constraints on
both sides of the market”.67
The Commission has taken a different route in its practice on payment card systems68 and in
particular its reasoning for the definition of a distinct market for comparison shopping ser-
vices in Google Search (Shopping) also reveals the use of a multi-markets logic in the con-
text of online platforms. Most notably, when delineating comparison shopping services from
merchant platforms from a demand side perspective, the Commission did not presume a
single intermediation service offered to two user groups, but distinguished between the us-
ers’ perspective and the online retailers’ perspective, and gave separate reasons why it as-
sumes that comparison shopping services and merchant platforms serve a different pur-
pose.69 Given this differentiated reasoning, it would have been desirable for the Commission
to have also stated clearly that, correspondingly, two interrelated markets can be distin-
guished: one in which Google Shopping offers consumers a service to find products they
may be interested in, and another one where it offers sellers a listing service that helps them
to reach consumers.
A view on the practice of the Member States’ authorities and courts reveals a considerable
heterogeneity as to the right approach in case of matching platforms. After the Netherlands
Competition Authority, in a 2007 merger case that involved two horticultural platforms, opted
for a single-market approach,70 it was most notably the Bundeskartellamt that explicitly con-
sidered the issue. As a matter of principle, the authority assumes that separate product mar-
however, dubious since it would mean that market definition was dependent on the used price instru-
ments. Based on this concept, in the case of a platform such as Airbnb, which charges only for complet-
ed bookings, the single-market approach would also need to be followed. In contrast, a multi-markets ap-
proach is required in the case of a platform such as HomeAway, a competitor of Airbnb in many regional
markets, which used to charge listing fees for short-term rental accommodation. Both firms could then
apparently not be attributed to the same market. However, as a property can be rented out via HomeA-
way or via Airbnb, the market definition would then not adequately reflect demand-side substitutability
and the competitive restraints a platform faces and, thus, would not fulfil its designated function as an in-
strument of competition law.
65 Note, however, that the Commission’s reasoning in the merger case Travelport/Worldspan (Case M.4523),
where it described the relevant market as a “market for electronic travel distribution services through a
[global distribution service]”, has been interpreted, for example, by the Bundeskartellamt as following a
single-market logic, although it was acknowledged that “[t]he intermediary service as a product, i.e. the
matching by the platform, is not considered in the context of market definition”. Bundeskartellamt, “Mar-
ket power of platforms and networks”, Working Paper B6-113/15 (2016), p. 27.
66 Ohio v. American Express Co, 585 U.S. __ (25 June 2018), slip opinion pp. 13–15.
67 Competition and Markets Authority, 16 Nov. 2017, Just Eat and Hungryhouse, para 4.11.
68 Case COMP/29.373, Visa International – Multilateral Interchange Fees, para 43; Case COMP/34.579, Master-
Card, COMP/36.518, EuroCommerce, COMP/38.580, Commercial Cards, paras 283–329.
69 Case AT.39740, Google Search (Shopping), paras 216–223.
70 Nederlandse Mededingingsautoriteit 5901/184 Bloemenveiling Aaslmeer – Flora Holland.14
kets for each side of a platform should be defined. However, in the case of matching plat-
forms the Bundeskartellamt regards a single-market approach as feasible if “user groups
essentially have the same need for liaising with the respective other group, and therefore, the
groups’ views regarding substitutability of function do not differ substantially”.71 On that basis,
the Bundeskartellamt assumed, for example, with a view on Amazon’s online marketplace
that the possibilities to substitute may be more limited for retailers than for consumers, who
want to shop and who could switch to competing retailers (online and offline). 72 This sug-
gests separate markets for the provision of online marketplace services to retailers, on the
one hand, and, on the other hand, to the consumers.73 In the same vein, the National Com-
mission of Markets and Competition (CNMC) in Spain opted for a multi-markets approach in
a merger case that involved online food ordering platforms. The CNMC assumed in particular
different freedoms for consumers and restaurants to bypass the intermediation services of-
fered by these platforms:74 while the former could readily directly contact the restaurants that
offered to deliver food, the latter were dependent on the intermediary services of the plat-
forms to gain access to their customers. Consequently, the authority defined, first, a market
where the online platforms offered their intermediation services to restaurants and, second, a
market where consumers could order food with delivery service both via the ordering plat-
forms and directly from restaurants.75
Yet, the Bundeskartellamt either adopted a single-market approach or considered such an
approach at least feasible in merger cases that involved online dating platforms,76 online
comparison platforms77 and real-estate platforms.78 The Autorité de la concurrence, the
French competition authority, referred to this latter decision when it also applied a single-
market approach in a merger decision that involved real-estate platforms.79 It is remarkable
71 Bundeskartellamt, cited supra note 65, p. 28.
72 Ibid., pp. 31–32.
73 The Bundeskartellamt closed its abuse proceedings after Amazon amended its terms of business for sellers on
its European online marketplaces. In its case summary, the authority stated that it was “inclined to as-
sume a product market for online marketplace services”, stressing that “Amazon’s significance as a
‘gate-keeper’ for customer access is high due to its large customer base, some of which use the Amazon
marketplace either primarily or exclusively for their purchases.” 17 July 2019, B2-88/18, Case Summary,
p. 10.
74 See, by contrast, the Netherlands Authority for Consumers and Markets’ approach in a case that concerned the
use of narrow price parity clauses imposed by the online food ordering platform “Thuisbezorgd.nl” on the
restaurants. Without taking an ultimate stand on market definition, the Dutch authority rejected
“speak[ing] of ‘a possible market for online food ordering platforms’, because it is clear that online plat-
forms compete with the direct sales channels of restaurants/restaurant chains”. Instead, the authority as-
sumed that there “could be ‘a possible market for delivered meals’ or ‘a possible market for delivered and
takeaway meals.’” 18 Nov. 2016, ACM/DM/2016/207286, Case no 15.1073.53, para 37 (references omit-
ted). The authority thus suggested a symmetrical (relative) independence of both the restaurants and the
consumers from the online food ordering platforms’ intermediation services.
75 Comisión Nacional de los Mercados y la Competencia, 31 Mar. 2016, C/0730/16 Just Eat/La Nevera Roja,
paras 26–37.
76 Bundeskartellamt, 22 Oct. 2015, B6-57/15, Parship/Elitepartner, paras 71, 75–78; case summary, p. 2.
77 Bundeskartellamt, 24 July 2015, B8-76/15, Verivox/ProSiebenSat1, case summary, p. 2.
78 Bundeskartellamt, 20 Apr. 2015, B6-39/15, Immonet/Immowelt, case summary, p. 2.
79 Autorité de la concurrence. 1 Feb. 2018, Decision n° 18-DCC-18, SeLoger/Logic-Immo, paras 20–29. Note,
however, that the authority remarked (without further explanation) that “the delineation of separate mar-
kets for each of the sides of this market would not change the conclusions of the competitive analysis”. It
is also noteworthy that in its recent merger guidelines, although the authority mentions the adoption of a
single-market approach in this decision, the explanations appear remarkably cautious as the authority
does not establish general rules as to whether and when it prefers to apply a single-market approach in15
that the adoption of a single-market approach in these cases does not seem to be the result
of a differentiated analysis of potential substitutes on both sides of the platform. 80 Instead,
the Bundeskartellamt put forward an “indivisibility” argument, essentially claiming that an
intermediation service offered to two (or more) “market sides” could not be split up into two
markets, as such a multi-markets approach could not fully do justice to the interdependen-
cies of the “market sides”. Moreover, the authority referred to the nature of the “matching
platform” as it stipulated, for instance, in its decision involving online dating platforms, that
the two user groups, i.e. men and women who are looking for a partner, would inevitably
meet again if they switched to conceivable alternatives.81 This statement does, however,
merely beg the question of the respective possibilities of men and women to do so without
the use of an online dating platform. If, for example, men’s and women’s inclinations to use
an online dating platform or user behaviour (e.g., the frequency of usage) is asymmetric, this
will result in different possibilities of substitution. In particular, it is conceivable that there are
specialized platforms where both groups are very asymmetrically distributed. Yet, when a
user considers switching from a platform with an imbalanced gender ratio to one with a bal-
anced gender ratio, this implies that the attractiveness of such a switch is likely to depend on
the user’s gender. Certainly, online dating platforms may have a self-interest in achieving a
balanced gender ratio, and there are instruments available that may be used for this pur-
pose, such as advertisements that specifically target one user group, or an adaptation of the
price structure for using the service. But, then again, it seems rather doubtful to assume
without hesitation that there are equal opportunities to substitute.82
Furthermore, one must not ignore that different people may use a matching platform for dif-
ferent purposes and with different intensity; thus, a platform seen as a good substitute by
some may be seen as a bad substitute by others and there may be systematic differences
between the two sides. Also, users on one side may typically be active on multiple platforms,
while users on the other side may be active only on one; this will affect substitution possibili-
the case of matching platforms. Autorité de la concurrence, Lignes directrices de l’Autorité de la concur-
rence relatives au contrôle des concentrations (2020), para 599.
80 This appears to be different with the judgment of the Court of Amsterdam in an abuse case involving a real-
estate platform. See Rechtbank Amsterdam, 21 Mar. 2018, NL:RBAMAS:2018:1654, VBO Makelaar v.
Funda en NVM. While the Court’s rhetoric indicates that it assumed a single-market approach (“The ex-
perts defined the relevant market as the market for housing websites in the Netherlands.” Ibid., at para
2.6), one of the economists who acted as a court expert in the case stressed that “[a]s funda was a ‘two-
sided platform . . . the experts considered potential substitutes and competitive constraints on both
sides”. See Niels, “Funda-mentals of Article 102: a dominant platform, but not abuse”, OxeraAgenda,
Sept. 2018, p. 2. On appeal, the Gerechtshof Amsterdam did not further elaborate on market definition
and confirmed the first instance decision in this respect. 26 May 2020, NL:GHAMS:2019:772, para 3.6.
81 Bundeskartellamt, 22 Oct. 2015, B6-57/15, Parship/Elitepartner, para 78; Case Summary, p. 2.
82 As a proof of concept, consider a market environment in which two matching platforms operate offering services
to two groups – e.g. men and women on heterosexual dating sites. Users are identified by their first name
and other characteristics. Suppose that both platforms accept all men, but that platform 1 accepts women
with a first name starting with a letter between A and K and platform 2 those with a first name starting
with a letter between L and Z. Thus, platforms are competing for men but not for women. In such a situa-
tion it is logically inconsistent to speak of a matching service offered by both platforms to all users since
on the side of female users there no substitution possibilities exist. The multi-markets approach easily
accommodates such an environment: there is one market for men, a market for women with a first name
starting with a letter between A and K in which platform 1 operates as a monopolist and for women with a
first name starting with a letter between L and Z in which platform 2 operates as a monopolist. Markets
are linked through cross-group network effects.You can also read
